We have known for a long time that Coinbase accepts scam merchants and has a KYC problem. The New York regulator DFS has also recognized this. The U.S. crypto exchange Coinbase accepted a multi-million dollar fine for allegedly being too lax in its anti-money laundering precautions. The company settled the case with $100 million, the New York financial regulator DFS announced. The authority imposed a $50 million penalty and obliged Coinbase to invest a further $50 million in improving its control mechanisms.
Founded in 2012, the Coinbase user base has since ballooned to over 108 million customers worldwide. However, its cybersecurity and transaction monitoring capabilities have not managed to keep up with the demands of such growth. The DFS report shows that, by the end of 2021, Coinbase had become overwhelmed by a “substantial backlog of unreviewed transaction monitoring alerts, exposing its platform to risk of exploitation by criminals and other bad actors.”
By the end of 2021, more than 100,000 transaction monitoring alerts and over 14,000 customer-enhanced due diligence flags were yet to be attended to by company personnel.
The regulator accused Coinbase of failing to screen customers before opening accounts adequately. The New York Department of Financial Services (DFS) said that criminal actors could access the trading platform. FinTelegram has actually discovered Coinbase as a payment facilitator in some scam reviews. Apparently, it was easy for scam operators to get accepted as merchants at Coinbase.